Americans may be dissatisfied with the economy but don’t look for Republicans to sweep control of the House and Senate.
Voters have good reason to be disenchanted with both parties.
Democrats have pushed through President Obama’s agenda. More than $800 billion in stimulus spending, health care reform and new financial regulations, yet the economy remains sluggish and Treasury Secretary Geithner tells us unemployment will linger near 10 percent for many months.
The Republican chant of less regulation and lower taxes is just not credible after the Wall Street meltdown of 2008 and with a $1.5 trillion budget deficit.
Voters want a clear plan to balance the budget and create decent jobs, and to win their confidence, one or the other party must come clean about what that takes.
Spending is more the problem than taxes—Congress has no self discipline.
In 2012, after most stimulus money is spent and the economy is three years into the recovery, the Office of Management and Budget estimates the deficit will stand at about $829 billion. Spending will be 23.2 percent of GDP, as compared to 19.6 percent in 2007, the last year before the Great Recession. The difference comes to $535 billion—more than half the budget gap—caused by new, permanent extravagance.
We don’t have to look far for solutions as unpalatable as those may be.
Social Security, Medicare and Medicaid are more than 40 percent of federal spending. Nothing gets fixed without fixing old-age pensions and skyrocketing health care costs.
Simply, Americans live longer, and without increasing the retirement age to 70, seniors will sooner or later get disappointed when the Federal government can’t pay what has been promised.
Americans pay 50 percent more for medical care than do the Germans—the United States spends 19 percent of GDP, while Germany, Holland and others, with healthier populations, spend about 12 percent.
Americans do get the privilege of paying more for drugs, doctors and health insurance executives, an army of claims bureaucrats that mindlessly harass, and waiting three weeks to see an urologist, orthopedist or other specialist, just like the Europeans and Canadians.
President Obama’s health care reforms were supposed to fix all that but now premiums and drug prices are jumping and small businesses are shopping for cut rate insurance policies that will further limit choice of doctors and jack up co-pays.
It is high time to get serious about aligning prices in the United States to what Europeans pay, reforming the claims process and stop treating the health insurance industry like Europe’s displaced landed aristocracy. That would require politicians to stand up to big contributors to their election campaigns.
I won’t mention tort lawyers—that is more than “progressives” can consider.
To grow, prosper and create jobs, Americans must stop viewing international commerce through a child’s eyes—it is not about the virtues of free trade vs. protectionism but combating economic aggression that threatens to destroy western prosperity and institutions.
China is abusing the World Trade Organization system, subsidizing exports into the United States and EU with an undervalued currency. It keeps out foreign products with high tariffs, requires foreign companies to transfer technology and compels Chinese companies to use Chinese products.
Eighty percent of Chinese wind farms are state owned and the turbines they purchase must have 70 percent Chinese content. It’s tough for U.S. and European companies like GE and Siemens to sell in China without moving production there.
The global economy always seems to grow between 3 or 4 percent a year over the business cycle. With its trade policies, China grows near 10 percent, the United States and EU grow less than 3, while Western governments can’t pay their bills, and China buys their debt with the proceeds of its trade surplus and gloats.
Behaving like innocents in the scoundrel’s grasp, Western leaders deserve Beijing’s contempt.
Getting tough with China is not protectionist—it’s self defense. Don’t stand up, and Beijing will end up owning the National Mall along with the Parthenon.
Sooner or later, a candidate for President or Speaker will grasp these things and explain them to Americans.
For now, Democrats obsess endlessly about race, gender, and soaking the rich; Republicans fixate on regulations, torts and taxes, and Americans are treated to 10 percent unemployment.
Neither party really deserves to lead.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.